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Statement of Need: This amendment of the participant contribution regulation would, upon adoption, establish a "safe harbor" period of a specified number of days during which certain monies that a participant pays to, or has withheld from wages, by an employer for contribution to an employee benefit plan, would not constitute plan assets for purposes of title I of ERISA and the related prohibited transaction provisions of the Internal Revenue Code. The amendment is needed to provide greater certainty to employers, participants and beneficiaries, service providers and others concerning when participant contributions to a plan constitute plan assets.

Summary of the Legal Basis: Section 505 of ERISA provides that the Secretary may prescribe such regulations as she finds necessary and appropriate to carry out the provisions of title I of the Act. Regulation 29 CFR 2510.3-102 provides that the assets of an employee benefit plan covered by title I of ERISA include amounts (other than union dues) that a participant or beneficiary pays to an employer, or has withheld from wages by an employer, for contribution to the plan as of the earliest date on which such contributions can reasonably be segregated from the employer’s general assets; the regulation also specifies the maximum time period for deposit of such contributions by the employer.

Alternatives: Alternatives will be considered following a determination of the scope and nature of the regulatory guidance needed by the public.

Anticipated Costs and Benefits: Preliminary estimates of the anticipated costs and benefits will be developed, as appropriate, following a determination regarding the alternatives to be considered.

Risks: Failure to provide the safe harbor that would be afforded by the proposed amendment with regard to monies contributed to employee benefit plans would deprive employers, other plan fiduciaries, and service providers of the certainty they need to optimize compliance with the law. Also, any risk of loss or lost earnings resulting from permitting employers who would otherwise transmit contributions to the plan sooner than the time specified in the safe harbor should be minimal, while the benefits attendant to encouraging employers to review and modify their systems or practices to take advantage of the safe harbor may be significant.